GLOBAL MARKETING

PROJECT REPORT

SWOT ANALYSIS AND INTERNATIONAL MARKETING MIX OF PEPSICO

SUBMITTED TO SUBMITTED BY Ms. CHARU BHARATI SUBHASISH BHATTACHARJEE Assistant Proffesor Roll:2K10IB24

SHIVAM DHARI Roll: 2K10IB23 ARVIND KHUSWHA Roll: 2K10IB38

HISTORY: PepsiCo, Incorporated is a Fortune 500, American global corporation headquartered in Purchase, Harrison, New York, with interests in the manufacturing, marketing and distribution of grain-based snack foods, beverages, and other products. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and beverage brands, the largest of which include an acquisition of Tropicana in 1998 and a merger with Quaker Oats in 2001 - which added the Gatorade brand to its portfolio as well. ORIGINS: The recipe for Pepsi, the soft drink, was first developed in the 1890s by a New Bern, North Carolina pharmacist and industrialist, Caleb Bradham, who named it "Pepsi-Cola" in 1898. As the cola developed in popularity, he created the Pepsi-Cola Company in 1902 and registered a patent for his recipe in 1903.The Pepsi-Cola Company was first incorporated in the state of Delaware in 1919.[10] Ownership of this company traded hands several times throughout the 1920s and 1930s, and in the early 1960s its product line expanded with the creation of Diet Pepsi and Mountain Dew. COMPITITION: The Coca-Cola Company has historically been considered PepsiCo’s primary competitor in the beverage market, and in December 2005, PepsiCo surpassed The Coca-Cola Company in market value for the first time in 112 years since both companies began to compete. In 2009, the Coca-Cola Company held a higher market share in carbonated soft drink sales within the U.S. In the same year, PepsiCo maintained a higher share of the U.S. refreshment beverage market, however, reflecting the differences in product lines between the two companies. As a result of mergers, acquisitions and partnerships pursued by PepsiCo in the 1990s and 2000s, its business has shifted to include a broader product base, including foods, snacks and beverages. The majority of PepsiCo's revenues no longer come from the production and sale of carbonated soft drinks. Beverages accounted for less than 50 percent of its total revenue in 2009. In the same year, slightly more than 60 percent of PepsiCo's beverage sales came from its primary non-carbonated brands, namely Gatorade and Tropicana. GLOBALIZATION OF BUSINESS: The structure of PepsiCo's global operations has shifted multiple times in its history as a result of international expansion, and as of 2010 it is separated into four main divisions:

1. PepsiCo Americas Foods 2. PepsiCo Americas Beverages 3. PepsiCo Europe 4. PepsiCo Asia, Middle East and Africa

As of 2010, 71 percent of the company’s net revenues came from North and South America & 16 percent from Europe and 13 percent from Asia, the Middle East and Africa.

SWOT ANALYSIS OF PEPSICO

This SWOT Analysis of company profile is a crucial resource for industry executives and anyone looking to quickly understand the key information concerning PepsiCo, Inc.’s business. PepsiCo seeks to achieve growth and long-term value by creating competitive advantages through new product innovation, strategic investments, acquisitions and alliances. The company is the second largest food and beverage company in the world after Nestle. Scope: - Examines and identifies key information and issues about (PepsiCo, Inc.) for business intelligence requirements - Studies and presents PepsiCo, Inc.’s strengths, weaknesses, opportunities (growth potential) and threats (competition). Strategic and operational business information is objectively reported.

1. STRENGTH:

A. Branding - One of PepsiCo’s top brands is of course Pepsi, one of the most recognized brands of the world, ranked according to Interbrand. As of 2008 it ranked 26th amongst top 100 global brands. Pepsi generates more than $15,000 million of annual sales. Pepsi is joined in broad recognition by such PepsiCo brands as Diet Pepsi, Gatorade Mountain Dew, Thirst Quencher, Lay’s Potato Chips, Lipton Teas (PepsiCo/Unilever Partnership), Tropicana Beverages, Fritos Corn, Tostitos Tortilla Chips, Doritos Tortilla Chips, Aquafina Bottled Water, Cheetos Cheese Flavored Snacks, Quaker Foods and Snacks, Ruffles Potato Chips, Mirinda, Tostitos Tortilla Chips, and SierraMist.

B. Diversification - PepsiCo’s diversification is obvious in that the fact that each of its top 18 brands

generates annual sales of over $1,000 million. PepsiCo’s arsenal also includes ready-to-drink teas, juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes. This broad product base plus a multi-channel distribution system serve to help insulate PepsiCo from shifting business climates.

C. Distribution - The Company delivers its products directly from manufacturing plants and warehouses to customer warehouses and retail stores. This is part of a three pronged approach which also includes employees making direct store deliveries of snacks and beverages and the use of third party distribution services.

2. WEAKNESS:

A. Overdependence on Wal-Mart - Sales to Wal-Mart represent approximately 12% of PepsiCo’s total net revenue. Wal-Mart is PepsiCo’s largest customer. As a result PepsiCo’s fortunes are influenced by the business strategy of Wal-Mart specifically its emphasis on private-label sales which produce a higher profit margin than national brands. Wal-Mart’s low price themes put pressure on PepsiCo to hold down prices.

B. Overdependence on US Markets - Despite its international presence, 52% of its revenues

originate in the US. This concentration does leave PepsiCo somewhat vulnerable to the impact of changing economic conditions, and labor strikes. Large US customers could exploit PepsiCo’s lack of bargaining power and negatively impact its revenues.

C. Low Productivity - In 2010 PepsiCo had approximately 198,000 employees. Its revenue per employee was $319,439, which was lower than its competitors. This may indicate comparatively low productivity on the part of PepsiCo employees.

D. Image Damage Due to Product Recall - Recently (2008) salmonella contamination forced

PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This followed incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage company image and reduce consumer confidence in PepsiCo products.

3. Opportunities:

A. Broadening of Product Base - PepsiCo is seeking to address one of its potential weaknesses;

dependency on US markets by acquiring Russia’s leading Juice Company, Lebedyansky, and V- water in the United Kingdom. It continues to broaden its product base by introducing True North Nut Snacks and increasing its Lipton Tea venture with Unilever. These recent initiatives will enable PepsiCo to adjust to the changing lifestyles of its consumers.

B. International Expansion - PepsiCo is in the midst of making a $1, 000 million investment in

China, and a $500 million investment in India. Both initiatives are part of its expansion into international markets and a lessening of its dependence on US sales. In addition the company plans on major capital initiatives in Brazil and Mexico.

C. Growing Savory Snack and Bottled Water market in US- PepsiCo is positioned well to capitalize on the growing bottle water market which is projected to be worth over $24 million by 2012. Products such as Aquafina and Propel are well established products and in a position to ride the upward crest. PepsiCo products such as, Doritos tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun Chips multigrain snacks, Rold Gold pretzels, Santitas are also benefiting from a growing savory snack market which is projected to grow as much as 27% by 2013, representing an increase of $28 million.

4. THREATS:

A. Decline in Carbonated Drink Sales - Soft drink sales are projected to decline by as much as

2.7% by 2012, down $ 63,459 million in value. PepsiCo is in the process of diversification, but is likely to feel the impact of the projected decline.

B. Potential Negative Impact of Government Regulations - It is anticipated that government

initiatives related to environmental, health and safety may have the potential to negatively impact PepsiCo. For example, manufacturing, marketing, and distribution of food products may be altered as a result of state, federal or local dictates. Preliminary studies on acryl amide seem to suggest that it may cause cancer in laboratory animals when consumed in significant amounts. If the company has to comply with a related regulation and add warning labels or place warnings in certain locations where its products are sold, a negative impact may result for PepsiCo.

C. Intense Competition - The Coca-Cola Company is PepsiCo’s primary competitors. But others include Nestlé, Groupe Danone and Kraft Foods. Intense competition may influence pricing, advertising, sales promotion initiatives undertaken by PepsiCo. Recently Coca-Cola passed PepsiCo in Juice sales.

D. Potential Disruption Due to Labor Unrest - Based upon recent history, PepsiCo may be vulnerable to strikes and other labor disputes. In 2008 a strike in India shut down production for nearly an entire month. This disrupted both manufacturing and distribution.

INTERNATIONAL MARKETING MIX OF PEPSICO

Mike Doyle, creative director at Arnell Group, explains that there was a great depth of exploration and research that was conducted before even beginning to formulate a new Pepsi marketing strategy. PepsiCo and Arnell Group traveled extensively to emerging markets to find key consumer product drivers for youth cultures and to learn how the Pepsi brand was perceived in different countries.

They found, somewhat surprisingly, that there were very few differences around the world in how consumers felt about Pepsi's fun, effervescent brand image. "The brand equity is really consistent," says James Miller, marketing director, Pepsi-Cola North America. They also found many consistencies in youth cultures around the world in how today's youth is preoccupied with newness, discovery, and personalization of their possessions. Miller describes the design campaign's goal as "sustainable discovery," where the consumer audience is constantly intrigued and engaged.

"We redefined packaging as media in the marketplace for Pepsi," says Doyle. "It speaks to youth in their language." Doyle believes that the designs succeed because they are able to capture the audience's mind space. "The designs are reflecting back to the culture instead of talking to the culture or imposing on it."

Marketing Mix is the set of marketing tools that the firm uses to pursue its marketing objectives. Marketing mix has a classification for these marketing tools. These marketing are classified and called as the Four Ps i.e. Product, Price, Place and Promotion. The most basic marketing tool is product which includes product design, quality, features, branding, and packaging. A critical marketing tool is price i.e. the amount of money that customers pay for the product. It also includes discounts, allowances, credit terms and payment period. Place is another key marketing mix tool. And it includes various activities the company undertakes to make the product accessible and available to the customer. Some factors that decide the place are transport facilities, channels of distribution, coverage area, etc. Promotion is the fourth marketing mix tool which includes all the activities that the company undertakes to communicate and promote its product to target market. Promotion includes sales promotion, advertising, sales force, public relations, direct marketing, etc.

PEPSICO’S 7 P’S OF MARKETING MIX:

A. Product:

1. Beverage Products - Diet Pepsi, Gatorade Mountain Dew, Thirst Quencher, Tropicana, Aquafina Bottled Water, Sierra Mist.

2. Savory Food Snacks - Fritos Corn chips, Cheetos, Ruffles Potato Chips, Lays Potato Chips, Tostitos, and Doritos.

3. Other Food Products - breakfast cereals, cakes and cake mixes. 4. PepsiCo recently created Baked Snacks North America Business Unit to meet consumer’s interest

in more nutritious snacks and foods.

The Pepsi-Cola drink contains basic ingredients found in most other similar drinks including carbonated water, high fructose corn syrup, sugar, colorings, phosphoric acid, caffeine, citric acid and natural flavors. The caffeine free Pepsi-Cola contains the same ingredients but no caffeine. Some of the different and varied brands of Pepsi are as follows:

1. All Sport 2. Aquafina 3. Caffeine-Free Pepsi 4. Crystal Pepsi 5. Diet Pepsi 6. Gatorade 7. Izze 8. Jazz 9. Josta 10. Kas 11. Manzanita Sol 12. Mirinda 13. Mountain Dew 14. Mountain Dew AMP 15. Mountain Dew LiveWire 16. Mountain Dew MDX 17 . Mug Root Beer

18. Pepsi 19. Pepsi Blue 20. Pepsi Cappuccino 21. Pepsi Max 22. Pepsi ONE 23. Pepsi Samba 24. Pepsi Tarik 25. Pepsi Twist 26. Propel Fitness Water 27. Sierra Mist 28. Slice 29. SoBe 30. Storm 31. Teem 32. Tropicana Products 33 . Tropicana Twister

QUALITY:-

PepsiCo follows one quality standard across the globe. PepsiCo has a long-standing commitment to protecting the consumers whose trust and confidence in its products is the bedrock of its success. In order to ensure that consumer stay informed about the global quality of all PepsiCo products sold in the world, PepsiCo products carry a quality assurance seal on them. The ‘ONE QUALITY WORLDWIDE’ assurance seal appears on the entire range of PepsiCo beverages.

THREE LEVELS OF PRODUCTS FOR PEPSICO:

1. CORE BENEFIT:

A drink for refreshment without alcohol.

2. ACTUAL PRODUCT:

Brand Name- Pepsi

Quality Level- Excellent

Design & Packaging- Regular (275 ml), Disposable (500 ml), Can (300 ml), Regular (1 Lt),

Disposable (1.5 Lt), Jumbo (2.5 Lt).

3. Augmented Product:

Good customer support (Fast & Accessible).

Aftercare, Easy to find contact details.

B. Price:

Expenses related to transportation, ingredients and labor continue to pressure the beverage industry toward price increases. PepsiCo’s drink pricing strategies may be heavily influenced by its working relationship with Wal-Mart whose low price themes put pressure on PepsiCo to hold down prices. The company strives to cut or maintain current prices by cutting overhead and re-engineering the manufacturing process. PepsiCo is expanding its use of inexpensive and recyclable plastic bottles; nevertheless the company has instituted some price increases in recent years, specifically in its overseas markets such as New Delhi and Dubai. The US CSD market is mature. The industry sales growth is largely driven by population growth as well as the amount of advertising and product innovation taking place in the industry. Given the mature nature of the market, both Pepsi and Coca Cola have resorted to pricing discrimination strategies to maximize the value of consumer demand.

1. Direct Price Discrimination:

The simplest form of extracting customer surplus is charging customers with different prices based on their location and purchasing power. This is evident in the international operations of both Pepsi and Coca Cola. Cola prices in Mexico, Brazil and Eastern Europe are lower than prices in the ASIA, even though the cost of the concentrate is practically the same. Domestically, direct price discrimination is based on distribution channel segmentation. Restaurant fountain drinks, single drinks at gas stations and take-home packs at supermarkets have all different prices on a per-unit basis even though their costs adjusted for packaging and distribution would not warrant such a discrepancy. Obviously, such segmentation helps situational-based pricing differences: the most price insensitive consumers seem to be restaurant customers who need a drink to go with their meal. Also, single-drink buyers at gas stations are more likely to be impulse buyers and therefore have less price sensitivity than weekend family shoppers at supermarkets who purchase 12-packs for home consumption.

2. Indirect Price Discrimination:

Quantity discounts along with price coupons used in supermarkets are obvious indirect price discrimination tools Pepsi can use. However, the most effective indirect price discrimination tool Pepsi has is in fact its brand name. The Pepsi brand equity actually allows the company to maintain its pricing power. Its product image translates into perception for higher quality vis-à-vis private labels and other substitute drinks. Also, for both supermarkets and convenience stores the CSDs represent the number one and number three top-selling items. Retailers use this product category to induce store traffic and create additional sales, which in turn reduces their power relative to Pepsi. Given the 80% margin on concentrate, it is easy to see why Wal-Mart and other discount retailers can undercut Pepsi’s pricing with private labels, but still they will be ineffective in ‘stealing’ Pepsi customers as long as Pepsi’s brand (and Coke’s for that sake) maintains high customer loyalty. Pepsi may enhance its price discrimination capability though creating bundle offers to restaurants and convenience stores. The Frito Lay brand, controlled by PepsiCo through Frito Lay North America, is the undisputed leader in the salty snack segment. If Pepsi bundles snacks with soft drinks as part of its pricing strategy aimed at fast food

restaurants and stores it may be able to increase sales and obtain better shelf space from retailers. This may prove a very important tactic in trying to re-claim share in the fountain drink segment.

C. Promotion:

1. PepsiCo instituted a so called Pepsi Stuff promotion whereby customers could accumulate Pepsi Points from buying various products these points could be used to by other products, most recently AmazonMP3.

2. A recent promotion involving the NY Yankees was not well received when not enough free tickets were made available.

3. In 2008 PepsiCo employed Tiger Woods to promote a Gatorade brand called Gatorade Tiger.

4. PepsiCo continues is promotional association with the NFL and the Super Bowl specifically marketing Pepsi and Doritos.

5. In 2009 Pepsi launched its “Pepsi Throwback” campaigned offering a drink with the sugar content of its original product.

Promotion is one of the four aspects of marketing. Promotion comprises four subcategories:

1. Advertising 2. Personal selling 3. Sales promotion 4. Publicity and public relations

The specification of these four variables creates a promotional mix or promotional plan. A promotional mix specifies how much attention to pay to each of the four subcategories, and how much money to budget for each. A promotional plan can have a wide range of objectives, including: sales increases, new product acceptance, creation of brand equity, positioning, competitive retaliations, or creation of a corporate image. Pepsi and coke are famous for their promotions. The rivalry was first started when Pepsi started with its blind taste tests known as the Pepsi Challenge. The challenge is designed to be a direct response to critics who allege that Coca-Cola and Pepsi-Cola are identical drinks, with no meaningful differences. The challenge takes the form of a taste test. At malls, shopping centers and other public locations, a Pepsi representative sets up a table with two blank cups, one containing Pepsi and one with Coke. Shoppers are encouraged to taste both colas, and then select which drink they prefer. Then the representative reveals the two bottles so the taster can see whether they preferred Coke or Pepsi. If Pepsi is revealed, the shopper is given a small prize. The implication is that Pepsi tastes better than Coke, and thus consumers should purchase Pepsi. In blind taste tests, more consumers prefer the taste of Pepsi to that of Coca-Cola. Because Coke was the historical leader, more people expected that they'd prefer and select Coke. Their surprise at picking Pepsi in the blind taste test (products were served in unmarked cups) helped change their minds about which product they prefer. Capturing this on film, Pepsi turned this into a memorable TV campaign that lasted many years. Also ad-campaigns are put up on the television by both the players. The following statistic just tells of much of share of ads on TV are captured by these players.

D. Place:

Pepsi again has spread worldwide. Pepsi when entering a new market does not go in alone but it looks for partners and mergers. Till now Pepsi has collaborated with companies like Quaker Oats, Frito-lays, Lipton, Starbucks, etc. Pepsi like Coke has spread all over the world. It is because of this worldwide spread that now it is coming up with Advertisements which can be broadcasted in the different nations in the world. The recent example with would be the Pepsi advertisements having David Beckham as it brand ambassador.

PepsiCo is primarily a US based company with approximately 52% of its revenues located in the states. PepsiCo is in the midst of making a $1, 000 million investment in China, and a $500 million investment in India. Both initiatives are part of its expansion into international markets and a lessening of its dependence on US sales. In addition the company plans on major capital initiatives in Brazil and Mexico. The company is also acquiring Russia’s leading Juice Company, Lebedyansky, and V Water located in the United Kingdom.

DISTRIBUTION:

1. DIRECT DISTRIBUTION:

A. Delivery of post mix cylinders and handling of key accounts: The key accounts are different wholesalers, restaurants and hotels. These are known as ‘NATIONAL KEY ACCOUNTS’ and this distribution is in every country in the world.

B. Export Parties

2. INDIRECT DISTRIBUTION:

A. Through base market distributors.

B. Through outstation distributors.

Some of PepsiCo’s supply source capabilities are,

1. Less Breakdown

2. High Quality

3. Flexible Supply capacity

4. Mature Production Process

E. Physical Evidence:

PepsiCo’s website provides a wealth of information about the company including the firm’s rich history and manufacturing process. PepsiCo is an industry leader in packaging - helping to promote and implement standards for sustainable packaging. PepsiCo has a packaging philosophy: reduce, reuse, recycle, remove and renew.

F. People:

1. PepsiCo fosters a corporate culture that values employees and emphasized diversity in the workplace.

2. PepsiCo is named to the 'Best Companies for Multi Cultural Women' list by Working Mother magazine.

3. PepsiCo is recognized at two events for its dedication to Talent Sustainability and dedication to

Asian American employees.

4. PepsiCo has won the 'Workplace Excellence' Award at Out & Equal Workplace National Summit.

5. PepsiCo is listed in the top 20 'Ideal Employer MBA Ranking' in Fortune magazine.

G. Process:

PepsiCo is in the process of removing high fructose corn syrup (HFCS) from both the traditional.

The Frito-Lay department will soon produce lay’s Kettle with natural flavors, and to boost the whole grain and fiber content, respectively, of its Tostitos and Sun Chips brands.

Flavor concentrates are shipped from special Pepsi-Cola manufacturing plants, The bottles and cans that will eventually be filled with Pepsi are manufactured elsewhere, and shipped to Pepsi plants wrapped and sealed for protection, Labels, cartons, caps, the carbon dioxide used to carbonate soft drinks and other supplies are also produced for Pepsi by other companies, Once on the belt, cans are part of an enclosed, controlled environment that keeps them sanitary and helps ensure quality throughout the filling process, Pepsi-Cola takes special care to purify the water it uses – a procedure that involves careful treatment, filtration and purification, Pepsi-Cola flavor concentrate is carefully combined with sweeteners and other ingredients in large stainless steel mixing tanks. Quality control audits performed by specially trained technicians are a critical part of the manufacturing sequence, In the last step of the manufacturing process, as the now-rinsed cans reach the filler, they're re-inverted, immediately filled and the lid is applied – at an average speed of 1,200 cans per minute.

TARGET MARKET OF PEPSICO: Pepsi targeted the teen market by forming exclusive contracts with American schools and developing advertising campaigns such as “The Next Generation” and “Joy of Pepsi”, featuring Britney Spears and also using different models, celebrities. Another disaster occurred in Venezuela last year for Pepsi. Without notice Pepsi's independent bottler, Embotelladras Hit de Venezuela, headed by CEO Oswaldo Cisneros, switched 18 plants and 2500 trucks to Coca-Cola for $300 million. Analysts feel that this move will cost Pepsi $400 million in sales and $10 million in profit. All this comes despite the friendship between PepsiCo CEO Roger Enrico and Albert Uribe, Pepsi's Regional President.

Pepsi has cast off Pizza Hut, Taco Bell, and Kentucky Fried Chicken in an attempt to create a focused company to beat Coke. This will allow Pepsi to now battle for fountain rights in places such as Burger King, Wendy's, and McDonalds. This is not an easy task, though, considering Coke is three times Pepsi's size in fountain sales and has ten times more salespeople. Also, Coca-Cola's Sprite has knocked Diet Pepsi out as the fourth largest US soft drink to number seven. Currently Coke, Pepsi, and Diet Coke rank as the top three.

CONCLUSION: PepsiCo offers product choices to meet a broad variety of needs and preferences from fun for our items to product choices that contribute towards healthier lifestyles. A company’s promotional efforts are the only controllable mean to create awareness among publics about themselves. The products and services it offers, their features and influence their attitudes favorably.

PepsiCo is the brand who catches the heart of consumers and the attention of the youngsters’ all across the globe.

BIBLIOGRAPHY:

1. www.pepsico.com 2. www.wekepedia.org 3. www.google.com 4. Global marketing, 4th Edition, Warren J. Keegan & Mark C. Green, Page 93-116.